Source: University of Chicago, Department of Finance
Published: March 2018

Why Wall Street Should Pay Attention to Amazon Customer Reviews

Circulated: January 02, 2019

Using a dataset of 14.5 million customer reviews on Amazon.com from 2004 to 2015, Jiekun Huang finds evidence that consumer opinions contain information for stock pricing. A spread portfolio that is long on stocks with high abnormal customer ratings and short on stocks with low abnormal customer ratings delivers an abnormal return of around 55.7 to 73.0 basis points per month. Abornmal customer ratings positively predict revenues and earnings surprises. These results suggest that consumer opinions contain novel information about firms’ fundamentals and stock pricing.